1.Richard is putting together his files in order to prepare his tax return. He mentions two additional expenditures he plans to deduct as charitable contributions. Richard’s church ran a fundraising auction this year. Richard successfully bid $600 for a bottle of rare wine in the auction which was valued at $350. He wrote the check out to “San Fernando Valley Church.” Richard also attended a fundraiser for the American Heart Association where he bought $300 of raffle tickets. He wrote his check out to “American Heart Association.” Unfortunately, he did not win any of the prizes. Richard plans to deduct the $900. Please comment on Richard’s planned deductions.Your Answer:<0>While Richard does have bank records supporting payments made to qualifying charitable organizations, the value of any goods or services received by the taxpayer from the charity must reduce the value of any contribution made to the charity. In the case of the church auction, Richard received a bottle of wine valued at $350. Therefore, regardless of what his check says, he can only deduct $250, the excess of the amount paid over the value of the item received. With respect to the $300 of raffle tickets, in spite of writing the check out to a charity, the purchase of raffle tickets from any party is considered gambling. Richard has incurred gambling losses, not a charitable contribution. Richard should also be aware that in the case of contributions of $250 or more, the charity must furnish a separate statement to the taxpayer indicating the amount of the contribution and the value of any goods or services provided to the taxpayer. If Richard were to persist in taking such a deduction, upon audit the contribution would be disallowed and penalties most likely imposed.

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